This paper provides a framework for modeling the risk-taking channel of monetary policy, the mechanism how financial intermediaries incentives for liquidity transformation are affected by the central banks reaction to financial crisis. Anticipating central banks reaction to liquidity stress gives banks incentives to invest in excessive liquidity transformation, triggering an 'interest rate trap' - the economy will remain stuck in a long lasting period of sub-optimal, low interest rate equilibrium. We demonstrate that interest rate policy as financial stabilizer is dynamically inconsistent, and the constraint efficient outcome can be implemented by imposing ex ante liquidity requirements.